Compare two countries with different fundamentals. See if/when they converge.
y per worker grows at g · sustained growth requires g > 0
Conditional convergence?
No
Reading the chart
Two countries with same fundamentals but different starting k₀ → CONVERGE (catch-up growth). Different fundamentals → converge to DIFFERENT levels (no catch-up). The world looks more like the second case → conditional convergence holds, but absolute does not.
Real-world data — selected countries' fundamentals and per-capita GDP.
Country
Saving (s)
Pop. growth (n)
GDP/cap (PPP)
What you see
High-saving + low-population-growth countries are richer (top-left of the scatter). The pattern is consistent with Solow but EXPLAINS only part of cross-country variation. Institutions, geography, and human capital fill the rest.
Decompose U.S. real GDP growth into contributions from K, L, and TFP (the "Solow residual"). Adjust the input shares.
gY = α·gK + (1−α)·gL + gA
U.S. growth accounting
Postwar U.S. growth: gY ≈ 3%, of which gA (TFP) ≈ 1.5%, capital ≈ 1.0%, labor ≈ 0.5%. Half of long-run growth comes from technology — that's why we focus on R&D, innovation, and education in growth policy.